Corporate Performance Management: Benchmarking

In an earlier post I talked about the concept of the balanced scorecard, which if deployed correctly, will enable a company to better evaluate its’ corporate performance.  Please review this post to re-familiarize yourself with this concept, because the very first thing that a company must do in this regard is to identify the critical success factors for its business and the processes it needs to benchmark. 

Critical success factors are the aspects of the company’s performance that are essential to its competitive advantage. Each company’s critical success factors depend upon the type of competition it faces. One of the best methods companies use to develop these distinctive competencies that lead to customer satisfaction and competitive advantage is to identify and adopt best practices. This can be accomplished through benchmarking.

A benchmark is a standard of performance; and benchmarking is the process of measuring the organization against the products, practices and services of some of its most efficient global competitors. These measurements are called targets, and in this way, companies learn how their competitors perform and, more importantly, the business processes that explain why these firms are successful.  Dimensions typically measured are quality, time and cost.  

The company can use these targets as a model for its own operations (also called best practices). Through the application of research and software analysis tools, companies undertake best practice analysis to cut costs, boost output, and achieve their strategic business goals and objectives. This process continuously strives to imitate the performance of the best companies in the world, and through meeting these higher standards, the organization may be able to create a competitive advantage over its marketplace competitors. 

Best practice analysis involves investigating and documenting what the best practices are for the processes that are used in performing the firm’s critical success factor activities. Once all the critical success factors and best practices have been identified, the final step is to set up a system for measuring those factors and practices.  As has been mentioned in my earlier post, one of the most effective systems at measuring these best practices is the Balanced Scorecard.